Variances

Question 1

Possible Reasons for a Favourable Materials Price Variance?

Answer 1

• Unforseen discounts achieved
• Greater care taken in purchasing
• Change in material standard

Question 2

Possible reasons for an adverse material price variance?

Answer 2

• Price increase
• Careless Purchasing
• Change in material standard

Question 3

Possible reasons for a favourable material usage variance?

Answer 3

• Material used of higher quality than standard
• More effective use made of material
• Errors in allocating material to jobs

Question 4

Possible reasons for adverse material usage variance?

Answer 4

• Defective material
• Excessive waste
• theft
• Errors in allocating material to jobs
• Stricter quality control

Question 5

Possible reasons for favourable labour rate variance?

Answer 5

• Use of workers at a rate of pay lower than standard

Question 6

Possible reasons for an adverse labour rate variance?

Answer 6

• Wage rate increase
• Excessive overtime

Question 7

Possible reasons for favourable labour efficiency variance?

Answer 7

• Output produced more quickly than expected

Question 8

Possible reasons for adverse labour efficiency variance?

Answer 8

• Lost time in excess of standard allowed
• Output lower than standard because of lack of training, or deliberate restriction
• Errors in allocating time to jobs

Question 9

Possible reasons for favourable overhead expenditure variance?

Answer 9

• Saving in costs incurred
• More economical use of variances

Question 10

Possible reasons for adverse overhead expenditure variance?

Answer 10

• Increase in cost of services used
• Excessive use of services
• Change in type of services